US demand for China-made goods falls on tariff worries, ocean freight rates drop

Port of Los Angeles (Photo: Port of Los Angeles/Phaata)

Container freight rates from China to the US have more than halved since the start of this month, as imports have recovered less than expected following a sharp decline triggered by President Donald Trump's imposition of 145% tariffs on China.

Mr Trump quickly reversed course, lowering the tariff rate to 30%. However, the cost increase for goods from the US's No. 1 seaborne trading partner remains significant, especially at a time when US economic data is signaling weakness.

Freight rates on the closely watched route from Shanghai to the U.S. West Coast appear to have bottomed in the short term at around $2,500 per 40-foot container, after peaking at around $6,000 earlier this month, Jefferies shipping analyst Omar Nokta said in a note Thursday.

Freight rates have surged to recent highs after Mr. Trump cut tariffs on China to 30% from 145%. That has prompted US importers to rush to place new orders for goods they had put on hold because of the steep tariffs.

The retreat in shipping rates "is a sign that the recent surge in imports to the U.S. ... will fail to have the lasting impact we had initially expected,” shipping consultancy Drewry said Thursday.

The Drewry World Container Index fell 9% for the second straight week after five weeks of gains.

US consumers have yet to feel the full impact of the tariffs because many importers stocked up on goods before the new duties were imposed — delaying the price increases.

Now, time is running out. Walmart, the world’s largest retailer and a top ocean importer, has warned that it will start raising prices in late May and June.

On Wednesday, Federal Reserve Chairman Jerome Powell said he expected the tariffs to start boosting inflation this summer.

Tariffs on some goods have already increased, but there is a looming July 9 deadline for higher tariffs on a range of countries. It is unclear whether Mr. Trump will back down to the 10% base tariff that analysts are using as a minimum, or whether he will impose something more aggressive.

Some shipping experts say Mr. Trump has painted the United States into a corner with his trade war.

Imports into the United States nearly stopped in April, hit by Trump’s short-lived 145% tariffs on China. That output is rebounding. But the recovery may be smaller than expected as tariffs begin to weigh on consumer spending and economic growth.

“The more volume goes down, the less economic activity goes up. The less volume goes down, the more inflation goes up,” said John McCown, a senior fellow at the Center for Maritime Strategy.

“There is actually no comfortable place to land.”
 

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Source: Phaata.com (According to Reuters)

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